Krasner Life Settlement and Premium Finance

STEVE PIONTEK: To an outsider, it sounds like the business is becoming more complicated.

JORDANA BALSAM: The complications are being addressed.

STEVE WASHINGTON: You call it more complicated, but it’s actually going to benefit the growth of this industry and its maturation and wider acceptance, and also help towards the greater sophistication of this marketplace.

ROB HAYNIE: And that sophistication is the exact reason why the big Wall Street firms and the big banks are in our business– because it is complicated and it appears like we’re dotting our I’s an crossing our T’s.

MICHAEL COBEN: We’re just going through different checkpoints in different stages of growth in the industry, just like any other industry would have to go through checkpoints. We’re no different than what we’ve seen in other industries.

Where are the teeth?

STEVE PIONTEK: Listening to this conversation and everybody’s willingness to do the best, I think that’s really a strong thing, this impulse to self-police. But where are the teeth coming from that are going to make it really a great story in the public eye? Where is the enforcement for it–so that it’s not just the participants in the life settlement business saying we’re policing ourselves, but there are teeth to back up the good conduct that you all are advocating. That is really the central question here.

ROB HAYNIE: You can almost use the school of hard knocks because the self-policing thing takes care of itself. You either self-police and act properly and obey the rules and market conduct, best practices, whatever you want to call it, or you will not be in the market simply because you won’t be able to compete.

TED PRYOR: Customers are going to demand compliance. They’re going to demand behavior. They may not know exactly what that means right at this stage, but we can help them individually as firms explain what good compliance is. The industry association promotes what good compliance is. The bigger firms, not just an individual agent trying to get a deal done, but the firms they work for are the enforcers because they won’t associate with firms that aren’t up to that speed.

STEVE WASHINGTON: I think the self-policing concept only goes so far. Steve, to address your question about what are the teeth, they will be, one, advocating for regulation in states that are not regulated and advocating for improved regulation in the states that do actually currently regulate. And then the second sort of piece will be, again, the role institutional investors will play in demanding certain standards of performance. Those two things will drive things far greater than self-policing, although self-policing does have a role.

RICK JOHNSON: I think Steve makes an important point. Advocating for well thought out and reasoned legislation in states that don’t currently have any regulation and cleaning up the legislation that’s currently in existence, plus enforcement by the regulators, I think that’s the simple answer to this question. There are the teeth. You can bring it a lot more legitimacy to the issues that you’re talking about if that’s advocated for and completed.

TED PRYOR: One thing about legislation, though, is that a lot of these states have laws but no people to enforce them. So just putting in the legislation in various states that we all adhere to doesn’t necessarily cover it. The state of Connecticut doesn’t have anybody running around checking brokers’ licenses, that kind of thing. Everybody is registered there, so they have some information; but there’s no real spine to it unless it tips over to being an illegal activity.

MICHAEL COBEN: I think there has to be cooperation between the different parties involved. I would love to see a day when carriers can sit down with the settlement industry, can sit down with regulators and say, ‘Let’s figure out how we can coexist. We’re all here for one reason. There’s value to the consumer. You provide value and we do as well. Let’s figure out how to get this done.’ I don’t think that day is too far.

STEVE WASHINGTON: That may be. For instance, in the NCOIL model act, one item that’s included is a provision that’s intended to permit insurers to ask appropriate questions about applicants for policies. So I think that we’re trying to get to that point where we can satisfy concerns of carriers while permitting this marketplace to exist and to function in a rational way.

STEVE PIONTEK: It’s time to go around the table and have everybody give a summing-up comment if they want.

JIM CAVOLI: Clearly the market is growing, maturing. It’s becoming a more accepted and better understood transaction every day; and as that happens, the market itself is attracting better and better participants and driving out marginal players.

There will always be regulatory hurdles for the industry. As the newspapers print stories, regulators will react. That’s just the nature of being a regulated industry.

I think some of the big changes that will be coming will be the emergence of securities regulators and that they will begin to make their presence more, not less, felt in the industry. And I think that there will be a streamlining or a vertical integration of the intermediaries in this process. I don’t believe that two or three or four years down the road there will be as many intermediaries or separate company intermediaries involved in every transaction.

BRYAN FREEMAN: I think as people learn what the business is really all about and the regulatory regime that already wraps around it and begin to understand how they fit in it that we’ll be a lot better off and we’ll have kind of a level playing field that an industry needs to really grow.

RICK JOHNSON: I think the next several years we’re going to see continued growth in the industry. We’re going to see growing consumer awareness, just like we’ve seen agent and financial planner awareness grow over the past several years.

We’re going to eventually have acceptance of full disclosure of fees and commissions.

I think we’re going to move towards a standard of privacy protection for medical records perhaps even developing a standard where folks are just known by a case number instead of their names.

I also think we’re going to see the development of some sort of integrated CRM or technology platform that brokers, providers, agents can all be on the same database sharing platform rather than logging on to other individual websites to get that information. I think the outlook for the market is great.

JORDANA BALSAM: I’ll say it again because I truly believe this. I’m an advocate for the consumer. Regulation is great. Bring it on. As long as regulation protects the interests of the consumer, I think we’re in a good spot. At the end of the day, it’s all about getting the most value for an insured’s insurance policy. I think we have a lot of growing to do, but we’ve come very far.

RAMIRO RENCURRELL: I agree with those comments. I think the market from what it was two or three years ago to what it is today has evolved significantly. The market players are more sophisticated; the investors are more sophisticated. Even the sellers and the brokers are more sophisticated. So I see this becoming a more and more professional area and where our expertise will help the business grow and grow in a manner that it should, properly regulated. I agree with you that we need to protect the consumers, but we also need to protect the investors.

JORDANA BALSAM: It could be one in the same.

ROB HAYNIE: Short comment is that each and every time we sit at this table and come to LISA meetings, the future continues to look even brighter. In spite of some negative things that have happened, there have been way more positive. More and more sophisticated individuals are getting into the marketplace. And I encourage more people to get involved in our business. At the end of the day, the consumer will benefit even more.

MICHAEL COBEN: We provide a tremendous value to consumers, and as long as we continue to provide that value, our industry will grow. We do have a commitment and that is education. The education piece is critical for all interested parties.

TED PRYOR: Whenever I have a tiring day, I hark back to the fact that we’re on the right side of the consumer, and some of these issues that we worry about we get through because we’re benefiting the consumer. In our business, we generate millions and millions of dollars of extra cash for seniors that they didn’t know they had. It’s a good phone call to be able to make whether it’s us making the call or a broker making the call.

Our average is 300% of cash surrender value. It’s not 10% or 20%. It’s huge incremental dollar amounts that are available to them when they decide to sell a policy. This is a transaction where they’re in control. They can sell or not sell. We’re not forcing any of our clients to do anything. So if we can just stay the course and stay on that high road, we’ll be able to fend off the critics.

The second thing is huge institutions are getting into the business as buyers and as entities that want to make the product available to their clients. That’s a very positive thing. I think that two, three, four, five years from now the market will look very different because of the professionalization of the business.

DOUG HEAD: We’re out of the back woods and the log trails and the bumpy roads and we’re onto the super highways of tomorrow and things will just keep getting better.

STEVE PIONTEK: We’ve come to the end of our time here. I have really enjoyed this roundtable. I think it was substantive and will give our readers a very good picture of not only where the business is going but how deeply you care about the business. Thank you all for coming and participating in this.